Russia and OPEC – Uneasy Partners

On Wednesday January 27th Russian Energy Minister Alexander Novak met with a group of Russian oil companies to discuss the domestic and global energy markets, following which he announced that Russia would be prepared to discuss an output cut of 3-5% at a meeting with OPEC in February. On the face of it this would seem to imply that Russia might reduce production by 300,000-500,000 b/d, and indeed the immediate reaction of the oil market suggested that some credibility had been given to the statement as the oil price surged by 8% in the immediate aftermath of the comments. However, subsequent comments by other Russian and OPEC observers, combined with the history of Russia’s relationship with OPEC, which has achieved little of substance, suggests that an agreement is a long way from being concluded and has limited chances of success. A more interesting conclusion is that Russia, perhaps not surprisingly, has revealed its growing economic and corporate desperation to see oil prices rise.